ECON 1100 Global Economics (Section 05) Exam #1 Fall 2012 (Version B) Multiple Choice Questions ( 2. points each):

Transcription

1 ECON 1100 Global Economics (Section 05) Exam #1 Fall 2012 (Version B) 1 Multiple Choice Questions ( 2 2 points each): 1. is the subfield of economics that compares and contrasts the structure and performance of different types of economic organization. A. Microeconomics B. Macroeconomics C. International Trade D. Comparative Economic Systems 2. refers to the freedom of an individual to choose to purchase (or to choose to not purchase) a good or service at a price determined in a free market. A. The Invisible Hand B. Coercion C. Consumer Sovereignty D. Moral Suasion 3. In regards to a Production Possibilities Frontier, which of the following statements is true? A. An Attainable combination of output can never be characterized by Productive Efficiency. B. A combination of goods is Unattainable if it cannot possibly be produced with the currently available resources and technology. C. A combination of goods is characterized by Productive Inefficiency if it cannot possibly be produced with the currently available resources and technology. D. More than one (perhaps all) of the above answers is correct. 4. Adam Smith was A. a 20 st century American government bureaucrat. B. a 19 th century German philosopher, economist, and revolutionary. C. an 18 th century Scottish economist. D. a 17 th century English mercantilist. 5. Eli and Peyton produce footballs and athletic shoes. Eli s opportunity cost of producing a football is lower than Peyton s opportunity cost of producing a football. The suggests that they can increase their total output of these two goods if Eli focuses his production on footballs while Peyton focuses his production on athletic shoes. A. Incentive Principle B. Law of Comparative Advantage C. Cost-Benefit Principle D. distinction between a positive statement and a normative statement

2 6. Which of the following could NOT result in a change in demand for hand sanitizer? A. A change in consumer income. B. An increase in the price of cold medicine. C. A decrease in the market price of hand sanitizer. D. An increase in the number of buyers of hand sanitizer. 7. Which markets are represented in the simple Circular Flow Diagram? A. Markets for Financial Assets and markets for Exports. B. Markets for Goods and Services and markets for Financial Assets. C. Markets for Imports and markets for Exports. D. Markets for Goods and Services and markets for Factors of Production. 8. The U.S. presently has an estimated 2,203 trillion cubic feet of known recoverable natural gas reserves in the ground within its borders. This resource is A. human capital. B. a natural asset. C. a produced asset. D. the Invisible Hand. 9. first said From each according to his ability, to each according to his need. A. Alec Nove B. Adam Smith C. Karl Marx D. Louis Blanc For Question 10, consider the continuum between the economic systems of Pure Socialism and Pure Capitalism illustrated below. Point A Point B Point C Point D Pure Socialism North Korea Cuba Poland Germany Switzerland U.K. Hong Kong Pure Capitalism 10. Based upon the discussion in lecture, along the continuum illustrated above the economy of the United States currently would most accurately lie at. A. Point A B. Point B C. Point C D. Point D

3 11. Within our discussion of private ownership of property, it was noted that Property Rights consist of three different interconnected dimensions of rights, one of which was the right to restitution. The right to restitution refers to A. the right to decide how to use your property. B. the right to be able to seize the property of someone else in order to use it for the public good. C. the right to obtain ownership of property from or relinquish ownership of property to another person. D. the right to be compensated by another person when he damages your property. 12. The Law of Demand implies that A. demand for a good will increase if consumers realize an increase in income. B. if the price of a good decreases, then the quantity demanded of the good will increase. C. demand curves should be upward sloping. D. More than one (perhaps all) of the above answers is correct. 13. One of the three primary types of economic incentives is moral suasion, which could be described as A. the use of torture or other enhanced interrogation techniques in order to elicit information from someone. B. the use of monetary rewards or direct increases in consumption which result from engaging in an activity. C. attempts to convince individuals to behave in a certain manner because doing so is the right thing to do. D. None of the above answers are correct. 14. The Cost-Benefit Principle states that A. a person should take an action if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so. B. a society can produce a greater amount of total output when individuals focus their production on those activities for which they have a comparative advantage. C. a person is more likely to take an action if its benefits rises, and less likely to take an action if its cost rises. D. None of the above answers are correct. 15. When considering potential government policies, it is important to recognize that A. Republicans care only about the 1%, while Democrats care primarily about the 99%. B. most businesses are self-interested, but households are not. C. voluntary trade generally makes both sellers and buyers worse off. D. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy.

4 16. The provides an illustration of the general interactions between households and firms in a simplified free market economy. A. Demand Curve. B. Supply Curve. C. Production Possibilities Frontier. D. Circular Flow Diagram. 17. specifies what different parties must do, whatever the external circumstances, and provides for enforcement or compensation for nonperformance. A. A Contract B. A Market C. Indicative Planning D. The Invisible Hand For Questions 18 and 19, consider a society with the linear Production Possibilities Curve (i.e., a straight-line, which has a constant slope) illustrated below 4,200 Corn 3,300 C 2,400 1,800 A B 0 Trucks ,500 2,100 3, Point C (2,100 Trucks and 3,300 units of Corn) is A. Attainable and characterized by Productive Inefficiency. B. Attainable and characterized by Productive Efficiency. C. Unattainable. D. None of the above answers are correct. 19. Supposing that this society is producing an efficient combination of output, the opportunity cost of producing the 2,400 th Truck is the opportunity cost of producing the 500 th Truck. A. greater than B. exactly equal to C. less than D. None of the above answers are correct (since it is not possible for this society to ever produce 2,400 Trucks).

5 20. In the writings of Karl Marx, the bourgeoisie referred to the and the proletariat referred to the. A. government bureaucrats; entrepreneurs. B. business owners; working class. C. colonialists; nobility. D. tax collectors; artists and musicians. 21. The quote on page 12 of the Economics textbook suggests that Milton Friedman believed that Mother Theresa was A. irrational and not self-interested. B. irrational but self-interested. C. rational and self-interested. D. rational but not self-interested. 22. Consider a society consisting of only three people: Bea, Arthur, and Maude. Bea and Arthur spend all day producing clothing and food. At the start of each day Maude tells each worker precisely how much time to devote to the production of each good. The fundamental economic question that Maude is answering for this society is the A. Distributional Decision. B. Production Decision. C. Resource Use Decision. D. Entrepreneurial Decision. 23. In a box of Froot Loops Tommy received a code which could be redeemed for one free MP3 download on Amazon.com. Based upon a search of their website, he narrowed his choices to two songs: Somebody that I Used to Know by Gotye and (Can t Live Without) Your Love and Affection by Nelson. After deliberation he chose to use his code to download Somebody that I Used to Know. The Opportunity Cost of downloading this song is equal to A. the amount of money which he had to pay for the box of Froot Loops. B. the value he places on the MP3 file of (Can t Live Without) Your Love and Affection. C. zero, since he received the code for free. D. the maximum amount of money he would have been willing to pay to download Somebody that I Used to Know if he had to instead pay out of pocket to download the song (i.e., if he did not have the code for one free download ). 24. Privately owned enterprises in a free market economy have a primary goal of A. earning as large of a profit as possible. B. striving for social justice. C. tricking consumers into thinking that they are environmentally conscious. D. employing as many workers as possible (in order to make the unemployment rate as low as possible).

6 25. With which of the following statements is there general agreement among most economists? A. Increasing the minimum wage would lead to an increase in income for all members of the labor force and a reduction in the unemployment rate. B. The U.S. should restrict employers from outsourcing work to foreign countries. C. Tariffs and import quotas usually reduce the general welfare of society. D. None of the above answers are correct 26. Consider the following two statements: (I) Hockey legend Wayne Gretzky scored a total of 894 goals during his professional career in the NHL. and (II) The United States would be a better country if all recreational drugs were made legal. Statement (I) is a, and Statement (II) is a. A. Normative; Normative. B. Positive; Positive. C. Positive; Normative. D. Normative; Positive. For Questions 27 through 29, consider the following information regarding Rory s Total Benefits from playing golf in August (measured in dollars): Rounds of Golf Played Total Benefits from Playing Golf 27. Rory s Marginal Benefit for his 3 rd round of golf played would be A. $450. B. $150. C. $50. D. $ If Rory had to pay $25 for each round of golf played, then he would choose to play rounds in August. A. 0 B. 4 C. 8 D If Rory has the choice to either pay $25 per round of golf (as in question 28) or to pay $140 to play unlimited golf in the month of August (i.e., as much as he chooses, for a flat rate of $140) he should choose A. to pay $25 per round. B. to pay $140 for unlimited golf. C. either option, since his maximum Economic Surplus is identical under each option. D. neither option, since his maximum Economic Surplus is negative under each option.

7 For questions 30 through 32, refer to the graph below, which illustrates supply for Good Z in June Suppose that in June 2012, the equilibrium price was $5.10 price Supply June ,800 2,950 3,975 quantity 30. The value of seller s reservation price for the seller of the 2,000 th unit of good Z is A. $5.10. B. greater than $5.10 but less than $8.00. C. $8.00. D. None of the above answers are correct (since more information is needed in order to determine the value of seller s reservation price for this seller). 31. Keeping in mind that the equilibrium price in June 2012 was $5.10, it follows that in June 2012 there would have been at a price of $8.00 and at a price of $ A. excess demand; excess supply. B. excess supply; excess demand. C. excess demand; excess demand. D. excess supply; excess supply. 32. Suppose that Good Z is an inferior good and that Good Z is a substitute for Good X. If consumer income were to decrease between June 2012 and September 2012 (with all other relevant factors in this market unchanged), it follows that the equilibrium quantity in September 2012 would be A. less than 1,800. B. exactly equal to 1,800. C. greater than 1,800. D. None of the above answers are correct (since more information is needed in order to make any insights on the new equilibrium quantity).

8 33. In a typical modern economy, it is common for Government to have an impact on economic outcomes by A. redistributing income. B. defining and enforcing property rights. C. regulating the behavior of business. D. More than one (perhaps all) of the above answers is correct. 34. According to the results of the Economic Freedom of the World study, the level of economic freedom in the United States is A. greater than every other country in the world. B. relatively high but not higher than every other country in the world (illustrated by the fact that the U.S. ranked 10 th out of the 141 countries in the study, behind countries such as Hong Kong, Singapore, Canada, and the United Kingdom). C. relatively low but not lower than every other country in the world (illustrated by the fact that the U.S. ranked 97 th out of the 141 countries in the study, ahead of countries such as New Zealand, Australia, Germany, and India). D. lower than every other country in the world. 35. Which of the following is a basic characteristic of Capitalism? A. Private ownership of property is illegal. B. Economic decisions occur primarily in markets. C. Income is distributed on the basis of need. D. More than one (perhaps all) of the above answers is correct. 36. Last weekend Bill won $700 at a casino in Biloxi, Mississippi. He decided to use the money to purchase a new TV from Target. He was able to use the money to acquire the new TV since money serves as a A. medium of exchange. B. store of value. C. unit of measure. D. contract. 37. In 2012 college graduates earned $18,562 per year more than high school graduates. If this difference had instead been $24,500 per year, then we would expect A. everybody to pursue a college education. B. nobody to pursue a college education. C. more people (but probably not all people) to pursue a college education. D. fewer people (but still some people) to pursue a college education.

9 38. is the branch of economics which studies the functioning and performance of a society s economy as a whole (often with a focus on levels of and changes in aggregate measures such as the unemployment rate, inflation rate, and Gross Domestic Product growth rate). A. Comparative Economic Systems B. Philosophy C. Macroeconomics D. Microeconomics 39. Consider the market for lawn care services in Louisville, MS. Over 50% of the production costs of firms in this market are accounted for by wages paid to workers, most of whom are paid the current minimum wage of $7.25 per hour. If the minimum wage were increased to $10.00 per hour, we would expect A. the Supply curve in this market to shift to the left. B. the Supply curve in this market to shift to the right. C. the Supply curve to remain unchanged, but a point further up the supply curve (i.e., at a higher price) would be realized in equilibrium. D. the Supply curve to remain unchanged, but a point further down the supply curve (i.e., at a lower price) would be realized in equilibrium. 40. The Patient Protection and Affordable Care Act was signed into law by President Barack Obama on 3/23/10. As this legislation was being debated, A. all educated and respectable economists opposed the legislation. B. all educated and respectable economists supported the legislation. C. educated and respectable economists had differing opinions on the legislation (evidenced by the fact that 40+ economists wrote a letter to President Obama in support of the legislation, while 130+ economists wrote a letter to Rep. John Boehner opposing the legislation). D. no economists expressed any opinion on the legislation (upholding a long standing tradition within the profession of never getting involved in matters of public policy).

10 (Blank Page)